TPBank gets US$100-million IFC loans to support MSMEs

The Hanoitimes - The five-year financing package is likely to improve the Vietnamese banking sector`s competitiveness by promoting a cashless economy via innovation and competition, according to IFC.

International Finance Corporation (IFC), a member of the World Bank Group, is set to provide a syndicated loan of US$100 million to TienPhong Commercial Joint Stock Bank (TPBank), which is aimed at helping TPBank further extend long-term funding to micro, small and medium enterprises (MSMEs), and individual borrowers through digital delivery channels, announced the former.

Overview of the signing ceremony.

"This syndicated facility is expected to have a catalytic impact for the Vietnamese banking sector, which is at a key juncture of mobilizing long-term private funding needed to support the country's key development goals of developing SMEs and creating jobs." said Kyle Kelhofer, IFC country manager for Vietnam, Cambodia and Lao PDR at the signing ceremony on July 10.

"The large mobilization component sends a strong signal to the market, creating a demonstration effect of private sector financing for this key sector," he added.

The five-year financing package - comprising US$60 million from IFC's own account, US$22.5 million from the multi-investor Managed Co-Lending Portfolio Program (MCPP) managed by IFC, and US$17.5 million from Industrial and Commercial Bank of China Ltd., Hong Kong Branch under IFC's B Loan Program - is likely to improve the Vietnamese banking sector's competitiveness by promoting a cashless economy via innovation and competition. It is further expected to create and facilitate between 35,000 and 56,000 jobs over the next five years.

Consequently, it would enable TPBank to double its MSME portfolio over the next five years, providing more than US$1.8 billion in about 46,000 loans by 2022. Notably, up to 65% of the transactions will be made digitally.

According to the IFC, lack of financial access is one of key challenges for MSMEs, which employ about 77% of Vietnam's labor force and contribute to around 41% of the country's gross domestic product (GDP). About 70% of MSMEs have unmet financing needs, resulting in a US$23.6 billion financing gap, equivalent to 12% of GDP.

Shifting to a cashless system is a priority for the government to increase efficiency, promote business and economic development, and reduce poverty in remote rural areas where it is difficult to reach through traditional financial providers, stated IFC.

IFC and TPBank's partnership started in early 2016 with a trade finance guarantee of US$10 million under IFC's Global Trade Finance Program (GTFP). The trade finance line has been expanded over the years with the current limit of US$60 million, allowing the bank to help more local companies increase trade, generate foreign exchange, and create employment opportunities.

IFC currently owns 4.38% of the bank's equity capital after its quasi-equity investment in May 2016 was converted into equity. In addition to financing, IFC has been helping the bank to strengthen its corporate governance and connecting it with a network of innovative financial service providers in the region.